Listen to this articleA trial court properly awarded damages to two siblings in their breach of fiduciary duty action against a third sibling who acted as their mother’s attorney prior to her death, the Eastern District Court of Appeals ruled on July 30.
Diane, David and Lisa were the only three children of their mother. They began assisting her with personal and financial matters in 2013 due to their mother’s deteriorating mental condition.
In April 2015, Diane took over sole management of their mother’s finances. She also had her mother sign a durable power of attorney (DPOA) naming Diane as her attorney in fact.
At the time, their mother had a valid will and other previous beneficiary designations in place naming all three children as equal beneficiaries of her estate.
Over the next few years, Diane transferred money from her mother’s account into her personal account, including the morning before her mother was removed from life support.
Following her death, their mother’s will was never probated, at the request of Diane. But when Diane repeatedly failed to divide their mother’s assets, David and Lisa filed a petition for an accounting in 2020.
At trial, Diane testified that their mother had intended that Diane be paid for her caregiving but presented no contract or other evidence proving such an agreement.
Following a bench trial, the trial court found that Diane breached her fiduciary duties to her mother by engaging in self-dealing and failing to maintain the estate plan by improperly commingling expenses and by removing and retaining sums of money from her mother’s accounts.
The trial court determined that David and Lisa were their mother’s “successors in interest” and awarded them damages. The court also imposed a constructive trust for David and Lisa equaling two thirds of the sum that would have otherwise been split equally among the siblings.
Diane appealed.
She argued that David and Lisa did not qualify as “successors in interest” under Section 404.717, leaving them unable to obtain damages, but the court disagreed in a divided opinion authored by Judge Renee D. Hardin-Tammons.
The legislature has defined the term, using the phrase “shall include,” which the court said indicated that the definition was designed to be widely applicable and nonexclusive.
Refusing to “unnecessarily and unreasonably” limit the statute, the court said it was reasonable that the legislature sought to clarify the statute by creating a statutory definition that was expansive in its application so that claims could be brought by parties other than beneficiaries, such as conservators and personal representatives, in recognition that such parties may be damaged.
“[T]he plain language of Section 404.717.6 is not ambiguous, as it clearly sets out a definition of ‘successors in interest’ as those persons who can prove they have ben damaged by the actions of the attorney in fact,” the court wrote. “The inclusion of nonexhaustive and illustrative examples does not change this definition, as the legislature’s language is that of enlargement rather than limitation. Rather than intending to limit the persons who can seek damages for an attorney in fact’s misconduct to only the enumerated examples, the legislature’s plain language points towards an acknowledgement that such classes of indirectly damaged persons like conservators or personal representatives can also seek damages for the beneficiaries of the principal.”
Nor was the court persuaded by Diane’s argument that because their mother’s will was not probated, her desire to have things split evenly among her three children had no force.
“Such reasoning goes against the established case law in Missouri,” the court said. “Allowing Diane to escape liability on the unsupported argument that a will is insufficient to show a testator’s intent until after the will has been probated – which in this case failed to happen at Diane’s own insistence – would encourage attorneys in fact to commit fraud against principals and beneficiaries, gravely harming the well-settled norms of fiduciary relationships.”
The court further rejected Diane’s contention that her acts were permissible self-gifts under the DPOA, particularly as she testified that the transfers were intended to cover expenses for their mother which Diane claimed to have paid.
Finally, while the court determined that the evidence was insufficient to support the imposition of a constructive trust, it found that a constructive trust was unnecessary, as David and Lisa should have been awarded damages for their claim under Section 404.717 for the amount the trial court ordered into the constructive trust.
Judge Michael E. Gardner filed an opinion concurring in part and dissenting in part, disagreeing with the majority’s construction of the statutory definition of “successors in interest” as he found section 404.717 ambiguous.
Henry P. Elster of The Elster Law Office in Clayton, who represented Diane, did not respond to a request for comment.
Neither did St. Peters attorney Heather M. Hall of the Hall Legal Group, who represented David and Lisa.
The case is Broy, et al. v. Broy, No. ED111275.